Below are the State Statutes of Limitations for various kinds of agreements. All figures are in years.

Oral Contract: You agree to pay money loaned to you by someone, but this contract or agreement is verbal (i.e., no written contract, “handshake agreement”). Remember a verbal contract is legal, if tougher to prove in court.

Written Contract: You agree to pay on a loan under the terms written in a document, which you and your debtor have signed.

Promissory Note: You agree to pay on a loan via a written contract, just like the written contract. The big difference between a promissory note and a regular written contract is that the scheduled payments and interest on the loan also is spelled out in the promissory note. A mortgage is an example of a promissory note.

Open-ended Accounts: These are revolving lines of credit with varying balances. The best example is a credit card account. Please note: a credit card is ALWAYS an open account. This is established under the Truth-in-Lending Act:

TITLE 15 > CHAPTER 41 > SUBCHAPTER I > Part A > § 1602
§ 1602. Definitions and rules of construction(i) The term “open end credit plan” means a plan under which the creditor reasonably contemplates repeated transactions, which prescribes the terms of such transactions, and which provides for a finance charge which may be computed from time to time on the outstanding unpaid balance. A credit plan which is an open end credit plan within the meaning of the preceding sentence is an open end credit plan even if credit information is verified from time to time.

Keep in mind, though, that the state statute of limitations on a credit card may come down to whether the agreement is in writing or not; whether it meets the required elements of a written contract. For instance, in Missouri if the creditor is able to produce a written credit card contract, then the 10 year statute applies. If the creditor cannot show the existence of a written contract, then the 5 year statute would apply – credit card or not. Here is case law in Missouri to illustrate this point:

In Capital One Bank v. Creed, 220 S.W.3d 874 (S.D. Mo.2000), the company alleged the parties entered into a contract, whereby the company would extend credit to the customer. The company alleged that the customer breached the terms of her contract by failing to pay the amounts for which credit was extended. The customer denied the allegations and asserted the affirmative defense that the action was barred by the statute of limitations. The appellate court ruled that the action was barred by the five year statute of limitations under Mo. Rev. Stat. § 516.120 (2000). The customer made a partial payment on December 2, 1999, and the company’s petition was not filed until January 3, 2005. The ten year statute of limitations under Mo. Rev. Stat. § 516.110 was not applicable because the company did not produce a written promise by the customer to pay money.

NEW YORK — It’s no mistake. This credit card’s interest rate is 79.9%.

The bloated APR is how First Premier Bank, a subprime credit card issuer, is skirting new regulations intended to curb abusive practices in the industry. It’s a strategy other subprime card issuers could start adopting to get around the new rules.

Typically, the First Premier card comes with a minimum of $256 in fees in the first year for a credit line of $250. Starting in February, however, a new law will cap such fees at 25% of a card’s credit line.

In a recent mailing for a preapproved card, First Premier lowers fees to just that limit — $75 in the first year for a credit line of $300. But the new law doesn’t set a cap on interest rates. Hence the 79.9 APR, up from the previous 9.9%.

“It’s the highest on the market. It’s the highest we’ve ever seen,” said Anuj Shahani, an analyst with Synovate, a research firm that tracks credit card mailings.

The terms are eyebrow raising, but First Premier targets people with bad credit who likely can’t get approved for cards elsewhere. It’s a group that tends to lean heavily on credit too, meaning they’ll likely incur steep financing charges.

So for a $300 balance, a cardholder would pay $20 a month in interest.

First Premier said the 79.9 APR offer is a test and that it’s too early to tell whether it will be continued, according to an e-mailed statement. To comply with the new law, the bank said it will no longer offer the card that has $256 in first-year fees as of Feb. 21, 2010. However, customers will still be able to use their existing cards.
According to First Premier’s website, the credit cards are issued by its sister organization Premier Bankcard. The company, based in Sioux Falls, S.D., says Premier Bankcard is the 10th largest issuer of MasterCard and Visa cards in the country, with more than 3.5 million customers.

In a mailing sent to prospective customers in October with the revamped terms, First Premier writes “…you might have less-than-perfect credit and we’re OK with that.” The letter notes that an online application or phone call is still required, but guarantees a 60-second status confirmation.

The letter also states there are no hidden fees that aren’t disclosed in the attached form. That’s where the 79.9% interest rate and $75 annual fee are listed. There’s also $29 penalty if you pay late or go over your credit limit. The credit limit is $300.

The bank did not say how many people were offered the 79.9 APR card, but noted that it needed to “price our product based on the risk associated with this market.”

Even if First Premier doesn’t stick with the 79.9 APR, it will likely hike rates considerably from the current 9.9% to offset the lower fees, said Shahani of Synovate.

The revamped terms may not be the only changes; First Premier also appears to be moving away from the riskiest borrowers.

The bank typically mails offers to subprime households, meaning those with credit scores below 700. In the third quarter, however, 84% of its offers were sent to subprime households, down from 91% the same period last year, according to Synovate.

First Premier could be cleaning up its credit card portfolio since the new regulations will limit its ability to raise interest rates. That could mean First Premier won’t issue cards as liberally to those with bad credit.

As harsh as First Premier’s terms seem, that could be a blow to those who rely on the card, said Odysseas Papadimitriou, CEO of CardHub.com.

“Even when the cost of credit is astronomical, for people in true emergencies, it’s much better than not having access to credit,” said Papadimitriou.

Until Feb. 21, First Premier is still offering its even-higher-fee card online. So the price for credit the bank charges is at least $256 in first-year fees

Here’s some friendly year-end advice: Read those disclosure letters that banks and credit-card companies are sending you in coming months—or at least try really hard.

The text of these mailings may seem like gobbledygook. But they may require you to make important choices soon. Ignoring them could mean paying a lot more money to your credit-card company, having a credit card rejected or getting an unpleasant surprise at the ATM.

In the Fine Print

Some changes to bank and credit-card accounts may require your response. Look for:

* Changes in credit-card interest rates or annual fees. You can opt out, canceling your credit card for new purchases.
* An end to the practice of automatically allowing you to exceed your credit limit. You can “opt in” to run over your limit but will pay fees if you do.
* An end to automatic enrollment in overdraft programs for debit cards. You can enroll and pay the fees—but there are cheaper options.

New legislation and Federal Reserve rules that go into effect in February and next summer will force banks and credit-card companies to give more notice of significant changes in card terms, limit some interest-rate hikes and require more detailed billing statements. But the rules will also require us to decide whether to opt in or out of rate increases and programs such as “overdraft protection” that we may have been automatically enrolled in previously.

The letters may be easy to miss, since some of them look like junk mail. And don’t expect reader-friendly prose. The banks’ approach is: “It’s not our job to teach you the law; it’s our job to comply with the law,” says Adam Levin, co-founder and chairman of Credit.com, a credit-information Web site.

When you open the envelopes, here are some details to look for and moves you may want to consider:

• Is the credit-card’s interest rate or annual fee changing? Many companies have been aggressively raising rates as high as 29.99%. But you now have the right to “opt out” of these changes before they become effective, essentially canceling the card for new purchases, though you can continue to pay off the balance at the old interest rate.

If you have an outstanding balance, this option especially matters right now because credit-card companies have a narrow window to hit you with higher interest rates. After the second round of the Credit Card Act goes into effect Feb. 22, the companies can raise rates on future transactions but not on your current balances unless you are at least 60 days behind in your payments. But until Feb. 22, any interest-rate increase can apply to both future purchases and current balances—which could mean substantially higher costs.

You may worry that canceling a credit card will hurt your credit score. Those fears are not unfounded. But let’s do the math: Say you owe $5,000 on the card and you’re paying $250 a month. If the original rate was 11.99% and you canceled the card, you’d pay off the balance in 23 months and pay about $600 in interest. If the rate spikes up to 19.99%, however, and you don’t make additional purchases, you would pay off the balance in 25 months, along with more than $1,100 in interest—a $500 difference.

So here’s another way to look at it: If you cancel the card and your credit score falls, your score likely will rebound in a year or two if you pay your bills on time and keep your debt levels in check. But if you keep the card and pay the higher rate, your $500 will be gone forever.

Of course, if you truly need the credit and fear you won’t be able to get a card somewhere else, it may be worth the money to keep the card. And if you pay your bill in full every month, the higher rate may be irrelevant.

• Has your credit limit been lowered? And do you borrow close to your limit? Starting in February, the new law will bar credit-card companies from charging fees (typically up to $39) for exceeding a credit cap unless the customer “opts in,” or agrees to pay fees for the convenience of busting the limit. If you don’t opt in, you run the risk that your credit card will be rejected when you near your limit. That could put those with small credit limits or high balances in an awkward position at the cash register. It also makes travel trickier since hotels and rental-car companies often put a hold on your card as a precaution, reducing your available credit.

You may be tempted this season to give in to the plea from that persistent sales clerk at one of the big retailers — “Are you sure you don’t want to save 15 percent today?” — and open up a couple of store-brand credit cards. After all, a 15 percent discount, or no interest payments for 18 months, sounds enticing when you are buying gifts by the armful.

Rules set to take effect in February require consumers to list more information on card applications, like income and assets.

But before you start filling out the application, there are some things you need to know. If you carry a balance on store-brand cards, known in the industry as private-label cards, or if you miss a payment on your no-interest purchase, you can end up wiping out those initial savings, and then some. And when you open a new credit card, your credit score can suffer, too.

As one expert put it, if you strip away the store discounts and brand names that come with these cards, many are essentially the same products marketed to subprime borrowers, or individuals with tarnished or fairly new credit histories. Would you really choose a card with an interest rate of say, 25 percent, or about 9 percentage points higher on average than many other credit cards?

“You are typically not getting the card because it has a lower interest rate or the financing is attractive,” said John Grund, a partner at First Annapolis, an advisory firm focused on the payments industry. “The first-purchase discount or, in the case of big-ticket items, promotional financing, is attractive to consumers. Then, it’s a function of ongoing benefits.”

Congress was aware of the lure of easy credit, so the credit card legislation it passed this year asked regulators to come up with a way to evaluate consumers’ ability to pay their credit card bills before they get the cards. Indeed, the Federal Reserve’s proposed new rules, set to take effect in February, require consumers to list more information on their card applications, like their income and assets.

But while that sounds like the new rules will make it tougher to get that store credit card, don’t bet on it. Retailers are not required to verify that information, and they have told the Fed that the quick check of credit scores they now do is adequate. Besides, they said, customers standing at the checkout may not be comfortable giving clerks sensitive information like a pay stub.

Chi Chi Wu, a staff lawyer at the National Consumer Law Center, said the proposed rules did not go far enough. “The Fed explicitly cited the fact that it didn’t want to hinder retailers from being able to instantly open credit card accounts at point of sale as the reason for not requiring verification,” she said. “We think that is not a good reason, since the current financial crisis was caused in part by the failure of lenders to ensure consumers could afford the loans they are given.”

In all the bustle of holiday shopping, the retailers will be counting on you to focus on all the benefits of these cards — and the benefits can be valuable, if you know how to use them. But you should also be considering the card’s terms along with the possible effect on your credit score. If you are looking to refinance your home, buy a new one or take out an auto loan, you may need every last point to buoy your score.

“If it costs you 5 or 10 points and it drops your score to 790, it’s a nonissue,” John Ulzheimer, president of consumer education at Credit.com, said. “But if takes your score from 700 to 690, that is a problem.”

There are several reasons opening one or more cards may drag down your credit score. First, the credit-scoring companies do not look fondly on new applications for credit. Inquiries stay on your credit report for two years, though they only count toward your score for the first 12 months. Once you get the new card, the new account itself also weighs on your credit standing for several months, in part because it reduces the average age of your credit history, which accounts for about 15 percent of your score.

Of course, if you have a pristine credit history and thousands of dollars in available credit on general-purpose cards (the type issued by MasterCard, Visa or American Express), you don’t have to be overly concerned about opening a store-only card, which tends to carry much lower credit lines. You are also more likely to qualify for what is known as a co-branded card, where a retailer like Toys “R” Us partners with a bank that issues a MasterCard, which can be used anywhere and carries somewhat lower interest rates.

“If I am someone who has the optimum mix of six or seven cards, it’s probably not terribly material as opposed to someone who is new to credit or who has a lower score,” said Shon Dellinger, vice president of myFico.com, which provides consumer information and credit products. “But if you’re shopping around and open up four cards to save 20 percent on each, that’s really not the right mind-set.”

In fact, people with less-than-perfect credit can be more harmed by opening a private-label card and carrying a balance than if they opened a general-purpose card. That’s because the credit limits are typically much lower — say, around $500 — than those of a traditional credit card. “So what happens is even modest purchases, a suit or some boots, can cause that card to be highly utilized because of the fact that it has a low limit,” Mr. Ulzheimer said. “The purchase might be negligible on a regular MasterCard or Visa.”

And your so-called credit utilization rate factors into your credit standing. When computing your FICO score, Fair Isaac, the company that developed the score, considers how maxed out each of your individual cards is, as well as your total amount of debt — and how that compares with your total available credit.

There are other reasons to read the fine print before getting these cards. Some retailers offer promotions where you do not pay interest for a certain period, as long as you pay off the balance by the time the promotional period ends. But if you do not pay off the balance, you will owe interest on your average balance during the promotional period — but interest will accrue starting on the date you bought the item. So if you bought a $1,000 television and you have paid off $800 by the end of the promotional period, you will still owe interest on your average balance, dating back to the day you bought the TV.

Sears and Best Buy are now running no-interest promotions. But if you participate in one of these plans, you need to pay attention to the date the promotion ends. At Sears, promotions begin on the date you make your purchase, said Chris Brathwaite, a Sears spokesman. That means if you bought the TV on Dec. 12, 2009, the bill must be paid off by the same date a year later — even if your statement happens to arrive on the 14th of each month, Mr. Brathwaite said.

Since most store cards have higher rates than most general-purpose cards, you do not want to fall behind. And if you do, you can do major damage to your credit score. Those with a FICO score of 780 — the scale ranges from 300 to 850 — who are 30 days or more overdue can lose 90 to 100 points from their scores, Mr. Dellinger said.

“Only get credit if you need it, and if you do get it, make sure you aren’t overextending yourself so you can do some of the basics like paying your bills on time,” he added.

A new national survey looking at the phenomenon of strategic defaults, in which homeowners choose foreclosure over continuing to pay on underwater mortgages, has found that nearly one out of 10 homeowners say they would walk away if they felt financially vulnerable and owed more on their homes than they were worth.

The telephone poll of 1,000 homeowners, conducted for Reecon Advisors, publisher of Real Estate Economy Watch, revealed that most would choose other options: 61.7% would talk to their lenders about modifying loan modifications, 44.3% would try to sell and 25% would rent out a room to help meet expenses.

To what extent homeowners are underwater also plays a role in the decision making process. Owners with negative equity of 10% or less rarely default, according to researchers from the graduate schools of business at the University of Chicago’s Booth School of Business and Northwestern University. But once negative equity reaches 50%, close to one in five owners would walk away.

The findings show that one out of four homeowners who default on their mortgages are making a strategic decision.

Whether owners should feel guilty about walking away has also been the subject of recent reports. In “Underwater and Not Walking Away: Shame, Fear and the Social Management of the Housing Crisis,” University of Arizona law school professor Brent T. White urged homeowners to stop paying their underwater mortgages if it was in their best financial interests. Further, he said they should not think of the decision as doing something morally wrong.

It’s a subject that’s ripe for debate.

Our society is vastly becoming more & more dependent on the use of CREDIT to make purchases and daily decisions. Today good credit is used for more than just getting a car or a home loan. People and businesses use this record of how well you kept your previous payment agreements to judge whether they can risk making a similar agreement with you. Now employers and insurance companies can also access and use your credit report as a way of determining whether or not to hire you or to approve you for an insurance policy.Having a good credit history is a central part of making a successful personal and financial future for yourself. Your credit history can help open doors to you or keep them locked.

What Is Credit?

Credit is a not a right it is a privilege and a convenience.
Credit is a promise and a contract. Companies make loans based on a promise to repay the loan plus interest.

If you have felt the effects of bad credit personally, then you know the damage extends far beyond simple financial concerns. Your credit score may be the single most important number in your financial life. You can’t erase the past, but your past can remain on your credit report for years.

If you’re worried that your Credit history doesn’t reflect what you believe your financial future should looks like, CALL NCR Credit Plus let one of our representatives give you a FREE consultation and present you with a specific action plan that you can utilize to maximize a strong, healthy credit profile.

NCR Credit Plus wants to educate you on the destructive nature of BAD Credit decisions BEFORE you make any more risky choices!

Question: Is co-signing a loan a good way to help a relative without actually loaning him money?

Answer: If you have to co-sign for a relative, you might as well have loaned him the money. And, in many cases, if you loan him the money, you might as well have given it to him.

If you co-sign and your relative stops making payments, you are obligated to make them yourself. He still has the house, car, or whatever, and you are stuck paying for it. Your financial situation is compromised, and your friendship probably is, too.

Best advice: Don’t co-sign or loan money unless you could afford to give your relative the money outright if things go south.

Question: What’s an “authorized user” on a credit card?

Answer: An authorized user is someone who can use a credit card but is not responsible for repaying it. For example, you can make your child or a dependent parent an authorized user on your card, but only you are responsible for paying the card debt. You might also make an employee or a personal secretary an authorized user on your card so they can make purchases on your behalf. The account will show up on the credit reports of both you and the authorized user.

Questions: Should I notify credit bureaus if I get a divorce?

Answer: Absolutely. If you get a divorce, you should immediately notify credit-reporting agencies of your new address and specify that your accounts and your ex-spouse’s accounts should be reported on separately. You don’t want your ex-spouse’s activities on your credit report.

Question: I keep getting blank checks from my credit card company that I didn’t ask for.?Am I liable if these checks get into the wrong hands? What should I do with them?

Answer: You should shred or otherwise destroy blank checks that come in the mail unsolicited. The credit card companies bear the responsibility if the checks get into the wrong hands, but you’ll be stuck with the hassle of straightening it all out. And thieves can do enough damage with blank checks to keep you busy straightening things out for a long time. To avoid that possibility, use a locking mailbox or pick up your mail promptly, and always destroy blank checks before you throw them away.

Return to Questions

In a world where shopping online and booking a hotel or a rental car usually demands plastic, few people can survive without a credit card.

But vast changes in credit regulation coupled with a souring economy turned 2009 into the most turbulent credit year in decades, with a record number of rate hikes, consumer cancellations and changes in fees, terms and credit limits. And experts say there’s more in store for 2010.

“2010 is going to be the year of accountability,” said Adam Levin, chairman and co-founder of Credit.com, a credit-shopping website. “Credit card companies are going to be more accountable to consumers, but consumers are going to have to be more accountable too.”

What should you expect in 2010, and how can you put yourself in the best position to lessen the pain, or even profit from the changes?

First it’s helpful to recap what’s already happened, said Bill Hardekopf, chief executive of LowCards.com. That’s mainly because many of the anticipated changes are linked to a consumer protection law that was passed earlier this year but is taking effect in stages.

In May, Congress passed the CARD Act — short for the Credit Card Accountability, Responsibility and Disclosure Act of 2009. But legislators gave banks time to acclimate to the new rules by putting in three effective dates. The first was in August, the second is in February and a final rule that affects gift cards applies next August.

What happened last August? Credit card issuers were required to give consumers 45 days’ notice of rate hikes and bill people at least 21 days’ before their payments were due. That was intended to assure that consumers were given adequate time to pay without getting hit with late fees.

In addition, consumers got the ability to “opt out” of a rate hike. The catch on this opt-out provision is that when you say no to the higher rate, the bank can close your account and double your minimum monthly payment, Levin said.

If you do elect to close the account, you can’t be forced to pay off your balance all at once. But the new law does allow banks to set up a schedule that guarantees you’ll have paid off your debt within five years. On the bright side, you pay off the debt at the old interest rate, not the higher one that the bank wanted to impose.

But most significant changes go into effect early next year.

As of Feb. 22, if you have a consistent history of paying on time your rates cannot be increased on outstanding balances except when a “teaser” rate expires or when you have a variable-rate credit card.

If a credit card company hikes rates on a fixed-rate card, they are only allowed to charge the higher rate on new charges.

Your rate can be increased if you’ve been irresponsible about your credit use, though. If your payment is more than 60 days late, the issuer can charge a penalty rate that could be vastly more expensive than what you were paying previously and that rate can be applied to an existing balance. However, the credit card company must reinstate the lower rate if you make at least six months of on-time payments.

And then there are those fees for exceeding your credit limit. You cannot be charged an “over-limit” fee unless you affirmatively opt-in to a program that will allow your card issuer to accept charges that put you over your credit limit. If you don’t opt in, the bank will simply reject any such charges.

All consumers also must be told how long it will take to pay off their credit balances if they make only the minimum required payments.

Youthful borrowers those under 21 will not be able to get credit cards unless they have a co-signer or can show that they have income to pay their own bills.

Issuers of “subprime” cards those going to people with bad credit histories may not charge customers upfront fees to obtain the card that amount to more than 25% of the credit limit.

These changes have already spurred a flurry of activity. In an effort to maintain their ability to change rates, banks have been converting fixed-rate cards to variable-rate cards and they’ve hiked rates on millions of customers.

In addition, some 58 million individuals have had credit cards canceled or their credit limits cut, said Craig Watts, spokesman for Fair Isaac Co., the makers of the FICO score. These cuts aren’t being imposed only on bad risks, either, Watts said.

The typical cardholder whose credit limit was affected had an excellent credit score, ranging from 760 to 770.

A new national survey looking at the phenomenon of strategic defaults, in which homeowners choose foreclosure over continuing to pay on underwater mortgages, has found that nearly one out of 10 homeowners say they would walk away if they felt financially vulnerable and owed more on their homes than they were worth.

The telephone poll of 1,000 homeowners, conducted for Reecon Advisors, publisher of Real Estate Economy Watch, revealed that most would choose other options: 61.7% would talk to their lenders about modifying loan modifications, 44.3% would try to sell and 25% would rent out a room to help meet expenses.

To what extent homeowners are underwater also plays a role in the decision making process. Owners with negative equity of 10% or less rarely default, according to researchers from the graduate schools of business at the University of Chicago’s Booth School of Business and Northwestern University. But once negative equity reaches 50%, close to one in five owners would walk away.

The findings show that one out of four homeowners who default on their mortgages are making a strategic decision.

Whether owners should feel guilty about walking away has also been the subject of recent reports. In “Underwater and Not Walking Away: Shame, Fear and the Social Management of the Housing Crisis,” University of Arizona law school professor Brent T. White urged homeowners to stop paying their underwater mortgages if it was in their best financial interests. Further, he said they should not think of the decision as doing something morally wrong.

It’s a subject that’s ripe for debate.

Many banks rack up fees by counting the biggest transactions first and enrolling customers in overdraft programs without their knowledge or consent.

One mistake could cost Trina Lee her Christmas.

Things have been tight for the Arizona-based nursing assistant since she got laid off two years ago and suffered some medical problems that have kept her from working full-time. As a result, she’s become meticulous about watching her bank balance, which is often uncomfortably close to zero.

Earlier this month, she was feeling temporarily flush because she has prepaid most of her bills and figured the rest of her December income from child support and a part-time job could be spent on Christmas gifts. So she splurged on a $65 meal with her mom and brother, knowing that it was possible that this one meal could overdraft her checking account. Debit card transactions like this one require a signature and usually take a couple of days to clear, so Lee monitored every purchase after that, copying her daily bank account activity into a computer file each night to make sure she wasn’t stepping over the line.

On Dec. 7, the night before her son’s child support payment was due, she breathed a sigh of relief. At 10:45 that night, the dinner charge still hadn’t posted and wasn’t even listed as pending. After subtracting every pending payment, she had precisely 16 cents in her checking account. She went to bed imagining that she’d dodged an overdraft because she would get a $156 payment in the morning.

She got a rude awakening.

Before crediting her account for the child support payment, Chase bank not only put through the dinner charge, it also “reordered” every one of her pending transactions, turning one potential overdraft into four. The mounting overdraft charges of $35 each then triggered two additional overdraft charges for small debit transactions that Lee did that day, before she’d realized that her account had gone into the red.

In total, Chase levied $210 in overdraft charges — $175 more than Lee imagined was possible.

“I accept responsibility for one overdraft,” said Lee, a 29-year-old mother of two. “But they created the rest of these. It’s really frustrating.”

Bank spokesman Greg Hassell said Chase would not reverse these charges because “Ms. Lee intentionally overdrafted her account, knowing she had insufficient funds for all her purchases.”

The fact that Chase in effect created five of the six overdrafts by changing the order of her transactions — deducting the biggest items first to drain her account faster — is simply current policy, the spokesman said.

The policy is common among big banks, industry experts say.

Bankers justify the policy by saying that it ensures that big, important transactions — such as mortgage payments — are paid first and thus have a lower chance of bouncing. Critics, however, say that argument doesn’t hold water because the banks pay all the transactions regardless. In that case, changing the posting order simply magnifies the effect of a single mistake by turning a single overdraft into several, just as it did with Lee. Indeed, an FDIC study completed late last year found that policies like this had caused overdraft fees to quadruple in just two years, ringing up some $24 billion in revenue for the banking industry in 2008.

Industry consultant Michael Moebs estimates that overdraft charges have continued to soar and are likely to account for some $38.5 billion in revenues this year, with roughly 90% of those fees being paid by just 10% of bank customers. Worse, the FDIC study found that most bank customers had no inkling they could suffer an overdraft charge in advance. Why? They’d been automatically enrolled in an overdraft program without their consent or knowledge.

Consequently, millions of bank customers used debit cards for small purchases, assuming that the swipe would be rejected if they didn’t have sufficient funds. They learned later that, say, a $2 coffee cost $37 because it triggered a $35 overdraft fee – a practice so common that many experts now say using a debit card has become dangerous.

The Federal Reserve announced this year that it will require banks to get advance permission before enrolling customers in overdraft programs, but the rule doesn’t go into effect until July. Senate Banking Committee Chairman Christopher J. Dodd (D-Conn.) and Rep. Carolyn Maloney (D-N.Y.) have also introduced legislation demanding that banks stop this practice of systematically “modifying posting order” and post transactions chronologically.

The overdraft legislation, which has been temporarily stalled while congressional leaders work on health reform and other financial regulations, would also require that fees bear some relationship to the cost of processing an overdraft; prohibit enrolling customers in an overdraft program without their consent; and limit the number of overdraft fees a bank could charge to a single consumer in any given month or year.

“To actively reorder checks to cause a tidal wave of overdrafts is unconscionable,” said Ginna Green, a spokeswoman for the Center for Responsible Lending, which has been pushing for the legislative fix. “This is exactly why we still need legislation.”

In the meantime, several banks including Chase have announced they will voluntarily revamp their policies.

Chase’s new policy, spokesman Hassell said, will eliminate changing posting order the crux of Lee’s complaint.

It will also reduce the maximum number of overdraft fees the bank would charge in a single day, reducing it to three per customer from six under current policy, and it will eliminate fees for overdrafts of $5 or less. Any of those changes would have dramatically helped Lee. Unfortunately, none has been implemented to date. The legislation is expected to be voted on early next year. Chase’s policies have an amorphous starting date — “in the first few months of 2010,” according to Hassell.

In the meantime, Lee and consumers like her are out of luck.